Lear Capital Discusses Why Gold Demand Hit Record Highs in 2024’s Second and Third Quarter

In 2024, the interest in gold from various parties — including the institutions that determine monetary policy for countries — has been considerable, says Kevin DeMeritt, founder and chairman of precious metals firm Lear Capital.

“Central banks continue to buy more gold than we’ve seen since the early ’70s,” DeMeritt says. “China continues to buy, [along with] Russia, India — and those countries are not day traders. They hold [the gold] for 10, 15, 20 years.”

In 2023, the demand for gold that stemmed from investment and other sources totaled a record 4,899 tons, according to the World Gold Council.

In tandem with a rise in both bar and coin investment and technology-related applications, the total global gold demand, including over-the-counter purchases, increased 3% year over year in the first quarter of 2024, making it the strongest quarter since 2016.

In what turned out to be the strongest second quarter on record, the World Gold Council said, due in part to further purchasing from central banks — which, with other official institutions, increased their gold reserves by 183 tons, or 6% year-over-year growth — the total global demand for gold rose 4% to 1,258 tons.

In July, the World Gold Council released findings from a survey it conducted that showed because of portfolio protection needs and the desire to diversify in a nuanced economic and geopolitical environment, central bank reserve managers felt gold allocations would continue to increase during the following 12 months.

Other data the organization shared in late October showed gold demand in the third quarter of 2024 was up 5% compared to the previous year, with artificial intelligence-related gold use in technology increasing 7%. The total demand for gold reached 1,313 tons — a record amount for the third quarter.

Gold Prices Have Also Increased

Amid the series of record price levels that gold reached during the third quarter, the value of the precious metal’s demand climbed 35% year over year to surpass $100 billion, an unprecedented amount.

Following a record quarterly average of $2,070 per ounce — a 10% year-over-year rise — in the first quarter, gold prices rose to an average of $2,338 per ounce — a new record — in the second quarter and with influential factors such as investment- and technology-related demand, even higher to an average price of $2,474 per ounce in the third.

The record-breaking price momentum that occurred in 2024, according to Louise Street, the World Gold Council’s senior markets analyst, along with elements such as geopolitical uncertainty, helped propel further investor interest in obtaining gold.

As of October, the World Gold Council said it anticipates formidable bar and coin investment will contribute to the overall gold demand total for the full year.

“Looking ahead, the step-change in gold investment flows is a trend that is likely to continue, which could keep both demand and price levels elevated,” Street said in a statement. “On the other hand, we’ve seen over 30 record price highs in 2024, and that environment will continue to be challenging for consumers. However, the prospect of economic growth is another factor we will be watching that could tip the scales.”

An Interesting Environment for Gold

Several factors could affect the demand for gold in the coming year, according to Kevin DeMeritt, including central banks around the world continuing to enthusiastically buy it and a possible recession in the U.S.

As DeMeritt said on a recent episode of the “Redacted News” podcast, which is available on Lear Capital’s YouTube channel, domestic currency production practices can also contribute to gold demand.

“Prior to 1974, every time you printed a dollar, you needed to back it by gold,” DeMeritt told host Clayton Morris. “That stopped the money printing from getting out of control.”

Without any requirement to back the bills that are in circulation with physical gold, the government can essentially put any amount of money into circulation it would like, DeMeritt says, yet only so much gold can be mined each year, imbuing the precious metal with an inherent value.

“[With] every dollar you print, the money that’s already out there becomes worth less,” the Lear Capital founder says. “If you add an increase in demand onto [a] physical supply that’s fairly limited, usually, you're going to find prices go up over time; it’s economics 101. Paper money is probably going to continue to fall as they print more of it — it has for hundreds of years now — and the price of gold is probably going to continue to increase.”

In today’s digital world, creating money may be as simple as entering an amount on a computer screen. The Federal Reserve can purchase financial assets such as Treasurys, mortgage-backed securities and corporate debt by depositing funds into the seller’s or borrower’s bank account that involve credit it creates, according to the nonpartisan 501(c)(3) research institution the Cato Institute.

As Lear Capital’s 24-hour spot price chart shows, gold’s price hovered above $2,650 per ounce for much of the day on Dec. 1.

If continued monetary creation and other factors help boost the demand for the precious metal in 2025, prices may follow, according to DeMeritt.

“I think you're going to find a continuation of the gold price going up,” he says. “There's probably a 90% chance we're going to keep continuing to have trillion-dollar deficits; countries are going to print money; interest rates are going to come down — which is usually very good for the gold market. Through the end of 2025, I would actually be shocked if you don't see it between $3,200 to $3,500 an ounce [for gold].”

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.